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Gojek and Tokopedia announce Indonesia's 'largest ever' merger

Nikkei Asia - May 17, 2021

Shotaro Tani, Jakarta – Two of Indonesia's largest tech startups, Gojek and Tokopedia, announced on Monday they will merge, a move that will create one of Southeast Asia's biggest tech conglomerates and cover everything from ride hailing and digital payments to e-commerce.

The merger will reshape the competitive landscape of the region's tech scene, which will now become a three-way battle between Singapore-based Sea, Grab and the newly formed Go To Group, which will bring together Gojek and Tokopedia even as the two continue to offer services under their current names.

Gojek and Tokopedia announced in a joint news release that they have "combined their business" with a total valuation based on past fundraising rounds of about $18 billion. They said that is the "largest ever in Indonesia and the largest between two Asia-based Internet and media services companies to date."

The companies began discussing a possible merger earlier this year, and negotiations accelerated in early April when both sides moved to seek approval from their respective investors.

They each count U.S. tech giant Google and Singapore's state investor Temasek among their shareholders. Other investors in Gojek include Facebook, which invested in the company's payment arm, global private equity company KKR as well as Indonesian conglomerate Astra International. Tokopedia's biggest shareholder is SoftBank, followed by Chinese e-commerce giant Alibaba.

The companies said that Go To Group has the backing of its "major investors."

Gojek's co-CEO Andre Soelistyo will become group CEO, while Tokopedia President Patrick Cao will serve as group president. Kevin Aluwi, Gojek's other co-CEO, will be the CEO of Gojek, while William Tanuwijaya, founder of Tokopedia, will be the CEO of the e-commerce giant.

"Gojek drivers will deliver even more Tokopedia packages, merchant partners of all sizes will benefit from strengthened business solutions and we will use our combined scale to increase financial inclusion in an emerging region with untapped growth potential," Soelistyo said in the release.

"For the consumer, Go To Group will continue to reduce frictions and provide best in class delivery of goods and services. This is the next step of an exciting journey and I am humbled and proud to lead the Go To movement," he said.

The companies said they had a total group gross transaction value of over $22 billion in 2020, and over 100 million monthly active users.

Gojek initially held merger discussions with Grab last year, but the deal collapsed as they could not reach an agreement on the shareholding ratio of a combined entity. Grab has since announced plans to go public in the U.S. via a special purpose acquisition company, or SPAC, seeking a valuation of $39.6 billion in what would be the biggest-ever deal of its kind.

A merger between Gojek and Tokopedia will face less regulatory scrutiny than a Gojek-Grab merger, as their business overlaps are limited.

The decision comes as competition in the region's tech sector heats up, especially as Sea makes aggressive inroads into sectors that had been the stomping ground of Gojek and Tokopedia.

Sea, the region's biggest tech company by market capitalization, has expanded into areas such as e-commerce and food delivery by offering aggressive promotions, backed by a fat war chest it built up through its ability to tap the public market.

Grab's SPAC deal also means it will have the ability to access the public market to fund its spending to survive the competition, while other tech companies like Indonesia's travel tech startup Traveloka are also seeking to go public.

Go To Group will also be aiming to go public, both in the U.S. and its home market Indonesia. Sources have said when it does go public, it will aim for a valuation similar to or higher than Grab's, as the entity will have an e-commerce arm, which would be more appealing to potential investors by virtue of offering more diverse services compared with Grab.

Source: https://asia.nikkei.com/Business/Technology/Gojek-and-Tokopedia-announce-Indonesia-s-largest-ever-merge